T-Online preparing to cut offer price?

CBS.MarketWatch.com

Europe's Internet shares got a double-whammy whallop Friday: one from the tumbling Nasdaq, the other from a Financial Times report that Deutsche Telekom AG is preparing to cut the offer price for its Internet subsidiary's IPO next month. T-Online is Europe's biggest Internet service provider, and is set to become Europe's biggest publicly traded Internet company when it starts trading on April 17th.

But even the blue chip Net names like T-Online are being dragged into the mire with market sentiment so negative for the sector in general, and for IPO's in particular. The FT claims the company will announce a price range of 30 to 40 euros per share for its offering, down from an earlier tentative range of 35 to 50 euros.

Deutsche Telekom
dt
for its part, shrugs off the report, calling it "speculative" and claims that the price range to be announced Monday will reflect the value of T-Online independent of the market's current mood. Nevertheless, the company emphasizes that it wants its stock to have solid growth potential.

"Our interest is to have good development of T-Online's stock over the long run," said company spokesman Stefan Broszio, pointing to the success of Deutsche Telekom's own shares since they hit the market in November 1996. Deutsche Telekom priced its stock at the equivalent of 14 euros at the time, Broszio noted. "There was a lot of speculation that we priced it too low," he said. "We said wait, and in the long run, it will have good development."

Deutsche Telekom's shares certainly have "developed" on that 14 euro starting price handily: it has traded as high as 104.90 euros in the last year. Friday, the shares traded at 82.59 euros, a 0.71 euro, or almost 1 percent drop from Thursday's level.

If that's the kind of example the company wants T-Online to follow, a low offer price would be a good bet.

Witness the fate of fellow Net floaters of the last few weeks which didn't follow such a cautious route: Lastminute.com shares, for one, fell below their steep offer price a week after they hit the market earlier this month. They're currently trading at 235 pence, or 38 percent lower than their 380 pence IPO level.

Dutch portal World Online, which started trading on March 17th, is now at 22.35 euros per share, or 48 percent lower than its IPO price of 43 euros. And Lycos Europe, which is changing hands Friday at 20.25 euros per share, is 15 percent below its 24 euro starting point.

Trader.com follows suit

In fact, there's a more recent example than Lastminute, World Online and Lycos Europe to illustrate the current trend. Trader.com, which operates about 40 classified ad Web sites around the world, quickly fell out of bed in its first day of trading on the Paris bourse.

The stock, priced at 30 euros per share, fell 28 percent below that level in its first 10 minutes of trading. It recovered a bit as the day wore on to a decline of 4.66 euros, or 15 percent, at 25.34 euros per share.

Thus tumbles, too

Another Net stock taking it on the chin Friday was Thus, the Scottish Power spinoff. The stock fell 18 percent in early trading after Goldman Sachs cut its price target to 700 pence and lowered its earnings estimates for the company, but kept its recommended list rating on the shares.

By the afternoon, Thus shares had come back slightly: down 77 pence, or 13.4 percent, to 497 pence per share.

Not Framfab, though

Not every Internet-related stock was underwater Friday. Sweden's Framfab, for one, managed to soar in the opposite direction, adding 25 Swedish krona, or 14.5 percent, to 198. Why the gain? Investors liked the news that the Net consultant agreed to sell a defense-related consulting business for an undisclosed sum. Framfab said it's getting rid of the business in order to focus on its core Internet consultant operations.

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